Key Takeaways:
- Crypto entrepreneur sues IRS over crypto tax laws ambiguity.
- How IRS exonerated Josh before he became insistent on a lawsuit.
BELFAST (CoinChapter.com) – Josh Jarrett, a U.S.-based crypto entrepreneur involved in crypto staking, has taken the Internal Revenue Service (IRS) to court over their ‘unclarity’ on taxation of crypto tokens.
The angered entrepreneur, who had previously been ‘exonerated’ by the regulator, said he turned their proposal down to continue with his court case after they offered to refund taxes they received on his tokens. Instead, Josh sought a binding precedent for token developers and other crypto entrepreneurs exploited by the IRS due to ambiguity on crypto tax laws.
Josh vs. IRS—what transpired?
It all began in 2019 after the IRS taxed Jarrett on his newly created tokens backed by Tezos blockchain. Although he didn’t give too many details about his token, the crypto entrepreneur explained that the tokens involved DAO rewards based on fitness progress and life health insurance that reward people for healthy behaviors.
In a statement, the crypto entrepreneur said he filed his lawsuit after the IRS failed to respond to his claims of a refund for taxing his Tezos-backed tokens in 2019. Josh sued the agency for clarity on taxing new tokens created through staking. He said the regulators got back in December 2021 with a letter offering him his tax back.
Josh believes the regulators are offering him back his tax so he can quit his lawsuit. However, the entrepreneur insists that he continues the case. In doing so, he would be able to get an official ruling from the court. That would save him from similar incidents in the future.
Tax refund: is it a right call?
The IRS has proposed to refund Josh’s tax is not new. The regulator has made similar decisions on such cases in the past. Nevertheless, it is a positive development for proof of stake validators and Bitcoin miners.
Block reward from permissionless cryptocurrency networks, whether through proof-of-work mining, proof-of-stake validating, or some other mechanism is most accurately described as creating value through one’s capital and labor rather than receiving value from an employer.
Permissionless decentralized networks lack third-party promoters upon whom users rely in securities law; they also lack discernible employers and employees in the context of income tax law.
That does not mean that block rewards become tax-free. But it shows that IRS could them like crops, minerals, livestock, artwork, and assembly-line widgets. Taxed when sold, not when created!
